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February 14, 2012

Apple Facing Global iPad Supply Restraint Troubles

by editor

Proview International Holdings, a Chinese company, is seeking a ban on imports and exports of Apple's iPad, which could effectively shut down supply for the world.

According to a recent Bloomberg report, Roger Xi, a lawyer representing Proview, said the company owns a trademark through its Shenzhen unit and has been unable to reach an agreement with Apple over the use of the name.

Xie told Bloomberg that they are now applying to customs to ban any products that infringe its trademark to and from China.

An import and export ban in China would affect the rest of the world because Apple's primary manufacturer for the iPad, Foxconn, builds the devices at factories in southern China.

Apple reported a record 15.4 million iPads being sold last quarter, doubling the 7.3 million sold in the previous quarter.

Stan Abrams, an intellectual property lawyer and a law professor at the Central University of Finance and Economics in Beijing, told Bloomberg that this legal action puts a heavy burden on Apple to settle the case.

“There´s got to be a settlement, and fairly soon,” Abrams told the news agency. “I can´t see how much more incentivized to settle Apple could be.”

Apple lost a case to Proview in a Shenzhen court in southern China last year, when the court ruled in favor of the Chinese company over Apple.

Apple has appealed the decision, and a final hearing is due to start in the southern Guangdong High Court on February 29.

Apple said that it bought the rights to the iPad trademark several years ago, and that Proview refuses to honor the agreement.

"We bought Proview's worldwide rights to the iPad trademark in 10 different countries several years ago. Proview refuses to honor their agreement with Apple in China and a Hong Kong court has sided with Apple in this matter," an Apple spokeswoman told Reuters.

According to reports in China, Proview is seeking up to $1.6 billion in compensation from Apple for trademark infringement.

The reports say Proview is deep in debt and needs a big settlement from Apple in order to help climb itself out.

Apple bought the iPad name from Proview Taipei in 2009, which was a Taiwan affiliate to Proview. A Chinese court ruled that Proview is not bound by that agreement, and rejected Apple's complaint that Proview was violating its rights.

Apple has the option to sue the Taiwan company on contract grounds for selling name rights, but Abrams said a victor in a suit like that would not give Apple rights to the name on the mainland.

"This kind of thing happens, but it's a mistake and it's a really bad one in this case," Abrams told the Associated Press. "They're paying for it now."